$4,680,000 Paper Lot Land Acquisition Loan in Ten Days; San Diego, CA

Transaction Description:

George Smith Partners successfully arranged a $2,800,000 non-recourse, short term acquisition loan for a 4.21-acre parcel near Stevenson Ranch in the Santa Clarita Valley of California. The Sponsor needed financing in a very short timeframe. GSP was able to source a private lender who closed in three business days. The loan offers 60 days of bridge term while the Borrower seeks a construction-to-permanent solution for a fully entitled, six-building, 966-unit, climate controlled, Class-A self-storage facility expected to complete construction in late 2020. The loan is non-recourse and the Lender did not require an appraisal or other third-party reports, thanks to the low leverage and strength of the Sponsor.

George Smith Partners arranged $12,500,000 in non-recourse acquisition debt secured by both a 58,237 sf lot containing a K-12 Prep School and a 29,400 sf lot containing a largely vacant retail center. The properties are situated in the Koreatown and Chinatown district of Los Angeles respectively. GSP targeted a capital provider comfortable with foreign sponsorship, proposed entitlements, religious relationship of the property, quick closing timeline, and the ability to focus on the future value of the land parcel. Sized to 45% of the $28MM total purchase price and fixed at 8.50% on an interest only basis, the non-resource facility has an initial term of 18 months followed by an optional 6-month extension. The capital provider closed the loan in 14 business days, allowing the Sponsor to close on the property quickly given the sellers strict timeline. All prepayment penalties were waved, allowing the Sponsor the flexibility to refinance at a lower rate once entitlements or construction financing are obtained.

Transaction Description:
George Smith Partners successfully placed a $13,740,000 acquisition bridge loan to acquire two land parcels and refinance three adjacent land parcels for a large mixed use hotel and condo development site in the heart of the Koreatown district of Los Angeles. With the final components of the land assemblage completed, the $200,000,000 mixed used development project is scheduled to break ground in March of 2018. Our Sponsor’s initial business plan was to build the mixed use project on three parcels of land previously held in his portfolio. The opportunity to acquire two adjacent parcels will allow him to double the total buildable square footage of the project. Fixed for 12 months, the non-recourse loan does not carry any prepayment penalty and closed in 5 days.

Challenges:
It was crucial to identify a lender who could close quickly, provide leverage, and waive any prepayment penalty. Due to the upcoming March 2018 groundbreaking, existing tenants on the current 3 parcel assemblage were all on short term leases with discounted rents. As a result, in place cash flow had been compressed and limited the ability for institutional lenders to get comfortable with the property and provide meaningful proceeds. Additionally, a fast close was necessary to take advantage of a seller discount.

Solution:
GSP identified an unconventional lender who focused on the future value of the five parcel assemblage and shovel ready development site rather than the current value based on in-place NOI. This capital provider closed the loan in 5 days, allowing the Sponsor to achieve a significant discount on the purchase price. The capital provider also waived all prepayment penalties, assuring the Sponsor would preserve significant capital once the subsequent construction loan is placed within the next few months.